What is Timothy Geithner doing as U.S. Treasury Secretary for U.S. President Barrack Obama? It seems like instead of trying to stabilize the global financial crisis, the only job he seems to be doing is instigating new conflicts with other countries and strategic partners. Several of his actions, including tax evasion, currency manipulation criticism and attempts to scapegoat other countries for the collapse of the financial market, have sparked controversy among the public about whether he is truly qualified to serve as a U.S. Treasury Secretary.
First of all, he failed to settle $40,702 in Social Security tax obligations between 2001 to 2004, until it was brought to the public eye.
Secondly, in late January 2008, he accused China its currency which deliberately preventing the Yuan from appreciating against the U.S. dollar, thus making Chinese goods relatively cheaper than goods in other countries, thus gives Chinese companies an edge over foreign competitors. However, according to a currency report, the Chinese Yuan has appreciated by 21% since July 2005, which shows China is allowing its currency to float in the foreign exchange market. In response to Mr. Geithner’s criticism, the Chinese Central Bank’s official said the currency manipulation charge is not only inconsistent with the facts, but also misleading about the reasons for the financial crisis. Furthermore, Chinese Prime Minister Wen Jiabao defended China’s currency policy, saying the strong fluctuation in different global currencies’ exchange rates is common and China should not take the blame from that. This currency criticism caused the interference of the White House to mitigate the furor when China and Russia criticized the U.S. of not taking enough responsibility in addressing the global financial crisis which started last year but only to blame other countries for causing this crisis.
Then, just one week after the Chinese currency manipulation accusation, Mr. Geithner suggested imposing stricter rules on the financial institutions asking for funds from the Troubled Asset Relief Program (TARP) which discouraged many qualified banks from accepting the Treasury’s funds. The new rules would require the U.S. Treasury to certify to Congress that each investment decisions are based on investment criteria and the health of the financial system, which aims at curbing the influence of lobbyists, politicians and others in determining which firms get bailout cash. In addition, the rules should cause more transparency since Treasury will have to explain why they are giving money to a specific company. These new rules are further complicating the financial system. While at least 50 banks that are qualified for aid, they have rejected the Treasury’s funds because they feel uncertain about the future requirements of the program which the U.S. may impose tougher restrictions on institutions that take government cash such as restricting their dividend payments, preventing them from acquiring other banks and expanding their businesses, and potential earnings dilution when government acquire convertible loans in exchange of the rescue funds. However, by declining the funds, these companies showed their investors that they have sufficient liquidity to operate its business without the government’s aid. It also shows that banks are starting to push back against increasing federal control of the banking system, raising concerns about the bailout’s effectiveness.
Since the financial sector suffered the biggest casualty, if the patients, who are the banks, are unwilling to take the medicine, which is the rescue fund, then the whole rescue plan will prove wasteful and unsuccessful. Therefore, Mr. Geithner should consider the effectiveness of his potential financial policies and rules to the banks before implementing them.
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